August 31, 2022
The Gap’s 2Q22 consolidated sales and comps fell 8% and 10%, respectively due to slowing demand, inflation pressure and 104 fewer stores since last year. In-store sales fell 10% and online declined 6%; it is now 34% of total sales. Continuing the trend from 1Q, comps at the largest banners were the worst performers; Old Navy (54% of sales) and Gap (23% of sales) dropped 15% and 7%, respectively, due to merchandise mix imbalances, poor product acceptance issues, and ongoing delays from supply chain disruptions. Slowing demand from inflationary pressures on lower-income consumers affected both brands, with Gap sales also affected by strategic store closures. The two smaller brands fared better; Athleta (9% of sales) grew 1%, and Banana Republic (14% of sales) was up a surprising 27%, due to the brand’s merchandise repositioning. During the YTD period, the Company closed 63 stores and opened 38 locations, ending with 2,799 Company-owned locations and 591 franchises. Due to ongoing supply chain and macro challenges, management withdrew its formal FY22 outlook and plans to slow store opening and cut share repurchases.
Lumen Field, home of the Seattle Seahawks pro football franchise, is opening a store featuring Amazon’s “Just Walk Out” checkout-free shopping technology and Amazon One palm-based entry and payment solution. It will become the first NFL stadium to implement both technologies in a single store, which will be known as District Market. District Market will offer a selection of assorted beer, wine, seltzers, and non-alcoholic beverages, along with local snacks and cuisine.
Dollar Tree reported a 6.7% sales increase, as consumers are turning to the dollar stores to stretch their budgets in the current inflationary environment. The new $1.25 price point at Dollar Tree continues to offset any decline in the number of units sold. Company-wide comps gained 4.9%, with both banners generating improved comps. Dollar Tree comps were up 7.5%, and Family Tree gained 2%. Both banners saw higher average tickets but declining traffic. Inventory was up a significant 48% from 2Q21. Part of the increase was inflation driven, but the shift to more consumables has left increased higher-margin discretionary inventory in stock. Management also cited improvement in trans-Pacific shipping, which led to higher levels being held in distribution centers. For its higher-priced items (above the $1.25 price point), the Company is going to have to compete with Walmart and Target, which are also sitting on excess inventory and will continue discounting in an effort to clear the backlog out. This will particularly affect Family Dollar, which carries higher-priced items. During 1H22, the Company opened 239 new stores and closed 37, finishing the period with 16,231 stores. Click here to request a sample list of future store openings.
Big Lots’ 2Q22 sales were $1.35 billion, a 7.6% decrease from last year, and up 7.5% compared to 2Q19. The decline was driven by a comp decrease of 9.2%. The three-year comparable sales growth rate was 3.6% in 2Q22, an acceleration from 1.9% in 1Q22. Net new stores and relocations contributed approximately 160 bps to sales growth. Inventory was up 22.8% to $1.16 billion, driven by significantly higher unit costs and a significant increase in in-transit inventory.
For 3Q22, the Company expects one-year comps to be down in the low double-digit range. Net new stores will add about 140 bps of growth versus 2021. The Company expects continued significant promotional activity in 3Q, resulting in a gross margin rate into the mid-30s, and that SG&A dollars will grow low single-digits to 2021. Click hereto request a list of future store openings.
Callaway Golf Company announced plans to change its corporate name to Topgolf Callaway Brands Corp. This follows the Company’s merger with Topgolf in 2021. The Company expects the name change to be effective on or about September 6. In connection with the change, the Company also intends to change its ticker symbol on the New York Stock Exchange from ELY to MODG to “reflect its leadership position in the Modern Golf ecosystem.”
Following the name change, each of the Company’s brands will retain their unique identities and go-to market strategies. Topgolf Callaway Brands will continue to be led by the current Callaway Golf Company management team.
As a second-tier player, Hibbett’s operations are showing the effects of its lack of pricing power. A 6% decrease in 2Q23 sales reflected a 9.2% drop in comps, partially offset by 37 store openings during the year. The sales decrease was accompanied by GM contraction of 460 bps, most of which reflected lower average product margin. When combined with deteriorating SG&A margin, operating income and operating margin fell 46% and 630 bps. During 2Q23, the Company opened 12 new stores, bringing the store base to 1,117 in 36 states, including the opening of the first store in Nevada.
Kroger has opened spoke delivery facilities in Nashville, TN and Maywood, IL, extending the reach of its automated online grocery delivery network to two additional metro areas. The Maywood facility will occupy 80,000 square feet about 20 miles west of Chicago and will operate in conjunction with a robotic customer fulfillment center (CFC) in Pleasant Prairie, WI. The new Nashville location facility, which is half the size, will serve as a cross-dock for orders fulfilled at its CFC in Forest Park, GA.
K-VA-T’s Food City announced its plans to acquire Cooke’s Food Store/Fresh n’ Low stores, which consists of the Cooke’s Food Store & Pharmacy as well as five Fresh n’ Low locations, all within or surrounding the Cleveland, TN area. Its store locations range from 15,000 to 35,000 square feet. The deal is expected to close by October 1. The Company said it will keep the Cooke’s/Fresh n’ Low name. According to Nielsen, as of July 2022, Cooke’s operated three stores and held 4.72% market share in the Cleveland, TN MSA. It marks the latest acquisition for Food City, as the Company continues to grow its grocery footprint. Previously, Food City bought several Piggly Wiggly operations in Southwest Virginia and Eastern Kentucky and has also acquired White Stores, Winn Dixie and BI-LO locations.
In 2Q22, Advance Auto Parts’ string of eight consecutive quarters of comparable store sales growth ended, reflecting weakness in the Company’s DIY omnichannel business. Specifically, consumer spending was down as a result of continued macroeconomic pressures such as broad-based inflation, rising fuel prices and an increased shift towards owned brands. This was partially offset by continued growth in the professional business. Overall, the Company’s 2Q sales increased just 0.6% on more stores in operation, but comps slipped 0.6%. The Company continues to expect to open 125 to 150 stores in FY22. We note that at an industry level, key drivers of demand remain positive, including the continued aging of the country’s vehicle fleet, which increases demand for replacement parts. Another critical variable is miles driven, which in 2Q still remains slightly above 2021 levels. Click here to request a sample list of future openings.
Williams-Sonoma reported solid results in 2Q22, as comp store sales grew 11.3%, including double-digit growth in both retail and ecommerce; ecommerce penetration increased 60bps to 65.4% of total sales. Pottery Barn (41% of sales) saw comps jump 21.5% and are up 51.1% on a two-year stack. West Elm (28% of sales) comps grew 6.1% on top of last year’s 51.1%, Pottery Barn Kids and Teen (13% of sales) saw comps of 5.3% and a two-year stack of 23.3%, and Williams Sonoma (12% of sales) comps were slightly positive at 0.5%, with a two-year stack of 6.9% and rebounding from -2.2% in 1Q22. During the quarter, the Company opened four stores and closed three, ending the quarter with 546 locations. Most of the stores it planned on closing are expected to be closed by the end of this year.
Ace Hardware’s 2Q22 sales increased 2.7% to $2.53 billion, with wholesale revenue up 2.9% and retail sales up 1.1%. Increases were seen across a majority of departments with outdoor power equipment, plumbing, paint and outdoor living showing the largest gains. Inflation drove retail comps to increase 0.2% at Westlake and 0.4% at Great Lakes Ace Hardware (the two members operate 215 stores altogether). Operating income rose 8.5% to $132.3 million. The Company added 38 new domestic stores and cancelled 12 stores, ending the quarter with 4,816 domestic stores, up by 87 units from the prior year. Click here to request a sample list of future openings.
Tractor Supply Company plans to open a new 1.2 million distribution center in Maumelle, AR in late 2023, to service over 300 of its stores. The facility includes 50,000 square feet of mezzanine space devoted to e-commerce. The DC represents an initial investment of $128 million and will be the 10th and largest DC in the Tractor Supply network. The Company operates 35 stores in Arkansas and 2,016 total across 49 states. Other DCs are located in Frankfort, KY; Casa Grande, AZ; Franklin, KY; Hagerstown, MD; Macon, GA; Pendleton, IN, Waco, TX; Waverly, NE; and Navarre, OH (scheduled to be complete later this year). Click here to request a sample list of future openings.
Urban Outfitters reported mixed 2Q23 results, with record consolidated sales of $1.18 billion, but operating income dropped nearly 50%. Retail comps were up 1%, driven by low-single digit online sales, while store traffic was flat, albeit compared to last year’s elevated comps of 22%. By banner, comps were strongest at Free People and Anthropologie, up 8% and 7%, respectively, while the namesake banner, Urban Outfitters, saw comps decline 9%. The rental business, Nuuly, had net sales nearly triple to $29 million, from a significant increase in subscriber growth. During the six months ended July 31, the Company opened 11 stores and closed four retail locations, ending the quarter with 698 stores.
Citi Trends’ sales and earnings fell for the second consecutive quarter, as the Company lapped a strong 2Q21. Management reported inflation hitting consumer wallets, reducing visits and basket size. Comps were down 25%, compared to a 25.6% increase in 2Q21, which was boosted by stimulus-driven demand. Sales fell 22% to $185 million, despite 28 net new stores added since last year. No new stores were opened or closed during 2Q, keeping the store base flat at 617 locations across 33 states.
Victoria’s Secret reported net sales of $1.52 billion in 2Q22, a decrease of 5.7% year to year. This result was below previously communicated guidance of sales to be up low-single digits to down low-single digits compared to 2Q21. Comparable sales decreased 8%. Company-provided operating income was $97.5 million.
During 2Q22, there was one store opening and six closures in the U.S., bringing the total Company-operated store count to 829 at July 30. By region, there were 803 stores in the U.S., and 26 in Canada; an additional 72 stores were operated in China under a joint venture. Click here to request a sample list of future openings.
IKEA expanded its Planning Studio format in the Los Angeles metro area with an 8,000 square-foot location in Long Beach, CA opened on August 29. A second location in Arcadia, CA is slated to open tomorrow (August 31). The two units are the first IKEA Planning Studios on the West Coast, joining four full-size IKEA stores in the greater Los Angeles market. Planning Studios do not sell products in store, but rather offer customers the opportunity to book appointments to get support from professional design specialists, with planning and ordering home furnishing solutions for kitchens, bedrooms, and bathrooms. The first U.S. Planning Studio opened in New York City in 2019; the Company also operates two such locations in London, U.K. and one each in Stockholm, Sweden and Warsaw, Poland. Click here to request a sample list of future openings.
Ulta’s 2Q22 sales rose 17% year-over-year to $2.30 billion, and were up 38% compared to pre-pandemic 2Q19. Similarly, comps rose 14.4%, driven by increases in both transactions and average ticket. Lower product margins and higher inventory shrink were mostly offset by strong growth in other revenue and the leveraging of fixed costs. Operating margin was roughly flat from the prior-year period at 17%.
In 2Q22, Ulta opened seven new stores and relocated four, ending the quarter with 1,325 locations. For FY22, the Company plans to open 50 new stores and remodel or relocate 35. In connection with its results, the Company raised its FY22 outlook, and now expects comps growth of 9.5% to 10.5%, compared to previous guidance of up 6% to 8%. Click here to request a sample list of future openings.
Workers at a Chipotle in Lansing, MI voted 11-3 to join the International Brotherhood of Teamsters on Thursday. The election was the first successful union push at Chipotle, which permanently closed a restaurant in Maine that filed for an election with an independent union earlier this summer. Click here to request a sample list of future openings.
Last week, Demoulas opened a third Market Basket in Concord, NH. At 81,000 square feet, the new store is significantly larger than the other two in the city. It also offers more amenities including a sit-down café and a larger selection of prepared and ready-to-eat food.
Last week, Piggly Wiggly opened a new store that became the first grocery store on Spartanburg, SC’s south side since Sav-A-Lot closed in summer 2019. Without the Piggly Wiggly, the south side would still be considered a “food desert,” an urban area where it is difficult to buy affordable or quality fresh food, according to the U.S. Department of Agriculture.
Dollar General’s sales grew 9% in 2Q22, as comps rebounded from a slightly negative 1Q22, gaining 4.6%. The positive comp number broke a streak of five consecutive negative comp quarters, as both average ticket and traffic were up. Consumable sales were about 13% higher over last year, making up just over 79% of sales, an increase of about 300 bps. In 1H22, Dollar General opened 466 new stores and closed 30, finishing the period with 18,566 stores. Click here to request a sample list of future openings.
Bloomingdale’s will open its second Bloomie’s location in Skokie, IL, replacing an existing Bloomingdale’s at the Old Orchard mall. The 50,000 square-foot Bloomie’s store will open in a new location within the mall, and will serve as the second smaller-format store under this banner. The first Bloomie’s opened in August 2021 in Fairfax, VA and was 22,000 square feet, compared to 150,000 square feet for a full-sized store; it offers a curated assortment of contemporary and luxury brands. See the adjacent map for the department store competition within the Chicago MSA. Bloomingdale’s operates 59 stores across the U.S.
Destination XL delivered better-than-expected 2Q results and raised FY22 sales outlook. 2Q22 sales increased 4%, with comps up 6.1% (comps up 3.6% in stores and 12.7% in the direct business). Top-line growth was primarily driven by higher tickets as a result of fewer promotions, favorable mix shift (higher penetration of tailored clothing, such as dress shirts and suits, and a lower penetration of basic sportswear), and a reduction in clearance inventory. Traffic was flat in 2Q22, which management attributes to pullbacks in consumer confidence and discretionary spending. The Company incurred a 180 bps increase in shipping costs in 2Q, which it was largely able to offset with reduced promotional activity. As of July 30, DXL operated 284 stores, down from 286 at the end of 1Q22 and 290 at the end of 4Q21. Management is aiming to open or remodel at least five stores in 2023 and believes it could potentially open up to 50 new and relocated stores over the next three to five years.
Camping World signed an agreement to acquire the Clear Creek RV Center dealerships, located in Silverdale and Puyallup, WA. The acquisition is expected to close in September. Both locations will transition to the Camping World brand, increasing the chain’s store count in Washington to six, joining existing locations in Liberty Lake, Pasco, Fife and Burlington. The Company continues to pursue dealership acquisitions to increase its market share. See the adjacent chart for other acquisitions that have occurred this year.
Ahold Delhaize is widening its curbside pickup service (BOPIS) to include 15 more Food Lion locations in Tennessee, Georgia, and North and South Carolina.
Schnuck Markets opened its first Schnucks Express store in Columbia, MO. The store has an interior connection to EatWell, A Natural Food Store by Schnucks, but also features its own entrance. Schnucks Express occupies approximately 11,000 square feet of the 42,000 square-foot building.
The below retailers recently released their earnings reports. To request more information on these companies, or to discuss the financial performance with a retail industry expert, please click here.
For more information on AggData contact Josh Suffin@ (800) 789-0123 x172
This information contained in this newsletter is compiled from sources which Market Service Inc. does not control and unless indicated is not verified. Its contents are not to be divulged. Market Service Inc., its principals and writers do not guarantee the accuracy, completeness or timeliness of the information provided nor do they assume responsibility for failure to report any matter omitted or withheld because of their negligence.
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